It is hardly the most cheerful prelude to the holiday season, even one as generally downbeat as this year's. According to a survey conducted for The Independent, the number of business leaders detecting signs of economic recovery has fallen for the first time since ComRes started its "green shoots" index last February. Similarly gloomy findings come from the Deloitte's quarterly Economic Review, which sees any upturn as likely to be sluggish and protracted. A sustainable and strong recovery, it forecasts, could be a long while in coming. We may be looking not at the V-shaped recession we hoped for, but a U, or even the dreaded W.
Such conclusions are pessimistic enough in themselves. But they are also the background against which the Chancellor's warning to the banks needs to be seen. Interviewed by the BBC yesterday, Alistair Darling warned that he would intervene if they were found to be charging small and medium-sized business too much for credit. And he pointedly reminded the sector as a whole that the Government did not embark on its tax-funded rescue as "some charitable act".
Now it is possible that the Chancellor's warning is no more than a shot across the banks' bows. The careful wording – Mr Darling says he will intervene only if it is found that businesses are being overcharged – could hint at a rhetorical element. He was speaking, after all, on the eve of a meeting with heads of banks today.
With a view to the same meeting, perhaps, the British Bankers' Association has released figures showing that lending to small businesses rose last month, while "almost 50,000 new small business banking relationships were established" – for what that is worth. Small business representatives remain to be convinced. No doubt there is a degree of posturing on every side.
But the arguments, being conducted in the open and between the lines, clearly illustrate the risk of a new vicious circle taking hold, in which every dashed expectation produces another. Mr Darling stressed the urgency of the situation yesterday. Unwittingly maybe, he also exposed the conundrum. "I want banks to rebuild their balance sheets," he said, "but at the same time, because of the particular circumstances we are in now, we also need them to relend money."
Indeed we do – but, with an election due by next June at the latest, the Chancellor and the Government need it most of all. So far, Mr Darling is sticking to his forecast that the recovery will start at the turn of the year, with modest growth through 2010. Yet he also confirmed yesterday that the rate of VAT will go back up at the end of the year, a sure indication that the Government cannot do without the money.
Overall growth figures for the last quarter, released last week, were markedly worse than expected, which makes the Chancellor's emphasis on small and medium-sized business understandable. Only a revival here will make his timetable for recovery anything like feasible. But for this sector to grow, it needs more credit, and so far, most increased bank lending has funded mortgages.
The banks' dual responsibility – not just to lending, but to their bottom line – however, leaves them with a get-out clause. If they judge that rebuilding their balance sheets should take precedence, it will not be easy for the Chancellor to force them to do otherwise. Was it not over-ambitious lending that was largely to blame for the onset of the credit crunch all those months ago? Every aspect of this crisis is connected, and Britain's economy is not out of the woods yet.